FXstreet

In an interview with Kitco News, Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, said that the bank is in no hurry to change its forecast and there is still a possibility for gold to drop below $1,000 an ounce.

In January, the firm said that it expects gold prices to average $980 an ounce this year and $860 in 2017; and, Tchilinguirian said that fundamentally nothing has changed.

In fact, the latest rally has made selling out of the money call options — the bank’s preferred way to take advantage of a weaker gold market — a lot more compelling, he added.

“Yes we’ve seen a rally in gold, which is something we were expecting, but the longer-term trend is still down,” he said. “In our last report, we warned about a rally in the near-term. The price overshot our target at $1,150 but we don’t think it has room to move much further.”

“We expected to see a rally in gold tied to risk aversion related to weakness in the Chinese economy. But if I look at what is happening now in China — expectations of yuan devaluation have subsided considerably and the Shanghai stock index has rebounded from its lows in January. A lot of the pressures that drove gold higher are now coming off,” he said.

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